Nokia’s continuing strategy: Push deep into the cheap

Fallen handset maker to show new inexpensive phones at Mobile World Congress.

"The first one now will later be last," Dylan paraphrased Jesus, and the mobile phone manufacturer landscape is axiomatic of the phrase. Finnish company Nokia was once undeniably the biggest name in the mobile phone industry, but the times they have a-changed: between Apple, Samsung, and Google in the smartphone market and less-expensive Chinese brands in the "feature phone" market, Nokia is suffering in a way that would have been unthinkable even five years ago. Its credit has been downgraded and it has pooled resources with fellow underdog BlackBerry in order to help stay alive.

However, the upcoming Mobile World Congress in Spain might give the company a bit more breathing room. Reuters is carrying the news that Nokia is expected to announce a lineup of low-cost handsets at the industry event next week. The new devices are expected to include several inexpensive feature phones targeted at developing markets—which are currently dominated by companies like Huawei (which is in the process of opening a new R&D facility right in Nokia's backyard). Also on the list is at least one (and more likely two) lower-priced Lumia smartphones, which will run Windows Phone 8.

Nokia's flagship Windows Phone 8 smartphone, the Lumia 920, has been well-received by the market and is a great handset (though we still prefer its competitor, the HTC 8X). Microsoft insists that Windows Phone 8 sales are doing just fine, and Nokia certainly has a huge stake in the Windows Phone 8 game: its entire Lumia product line runs some version of the operating system. The switch to Microsoft appears to be paying off, as Nokia posted a profit for the fourth quarter of FY2012.

Profitability is one thing. Gaining back worldwide dominance of the overall smartphone market means tackling the many-headed hydra that is Android, a difficult task because there's no single target to attack. Nokia's previous strategy of making good handsets and waiting for the customers to come to them isn't at all valid anymore, though, because Android's availability and customizability means OEMs in every market in the world can use it to quickly spin up and sell feature-rich handsets.

Windows Phone 8 is a fine mobile operating system, but it's not paired up with a diverse enough set of handsets to push into developing markets. Nokia is driving as hard as it can to change that, and the new handsets will expand on the strategy. The handset maker already has its crosshairs set on the mid- to entry-tier smartphone market with the Lumia 620 and Lumia 510, though the 510 runs the older Windows Phone 7.8. The new Lumias, which will almost certainly be another mid-tier handset (the Lumia 720) and an entry-level handset (the Lumia 520) are an attempt to carve a deeper swath into Android territory.

We'll be covering Mobile World Congress more in-depth next week, as Microsoft Editor Peter Bright and Associate Writer Andrew Cunningham soak up the sun in Barcelona and feed us ground reports from the huge trade show. Stay tuned!

73 Reader Comments

Nokia for awhile now has been the top dog when it came to cheap phones. This isn't really a new strategy, what is new is perhaps using WIndows Phone operating system, instead of their own mobile operating system which after Android started to crash and burn because of the low cost Android Phones.

What is actually news is Nokia one of the larger players going into these new regions.

Maybe Nokia should abandon their tragedy, er . . . um, I meant strategy of making Windows 8 phones instead of Android? It's not like the market share data wouldn't support such a change in strategy.

The problem is that Nokia and MS are attached at the hip based on business deals made over the last 3 years or so. That said, a viable option would be to make handsets for BOTH OSs. Similar to HTC. But it all comes down to the agreements made with MS.

Putting the conspiracy hat on, I wonder if Nokia will now see an uptick in 3rd world sales as a result of bulk purchases by the Bill and Melinda Gates Foundation?

Edit: For those down-voting, the Gates Foundation does indeed provide smartphones. See my post below for details or review the Gates Foundation Financial Services for the Poor page on the program. My apologies for not originally including citations in the original post.

Need more phones like the 620, and 620 available in more markets. Soon.For example, 920 and 820 was made available in Bangladesh like a week ago, but no 620. This is still one of those places where the name of Nokia means a lot, but at those price points there won't be many sales.

Nokia pooled their resources with Blackberry!? I seriously wonder, do online bloggers and writers even fact-check what they write anymore? That is completely and absolutely 100% FALSE. Nokia has done no such thing. Nokia has trimmed the bloat from their company, and they have pooled their own resources to survive. They also made a profit last quarter.

Blackberry is on it's own, and whatever resources they are pooling are merely their own, unless they are getting some bank loans.

Also regardless of how you guys at Ars feel about Nokia, they are absolutely dominating Windows Phone marketshare. The vast majority of Window Phone 8 devices being sold worldwide are Nokias.

They are very competitive in fact at the low-end, the under $100 market segment where Nokia's Asha phones are competing very well against Android.

Maybe Nokia should abandon their tragedy, er . . . um, I meant strategy of making Windows 8 phones instead of Android? It's not like the market share data wouldn't support such a change in strategy.

Actually that won't help them any. HTC is barely able to eek out a profit on Android phones (if they can even get to profitable). Samsung is the only one that really makes money there. Even Motorola lost money in that market in the last year.

For Nokia to move into Android would put them straight up against Samsung competing on Samsung's ground. By staying in the Windows Phone market they still compete with Samsung but not on Samsung's turf. Why do you think HTC made such a push into the WP market? They can't win in the Android market so they're looking for another area to play in.

Also, you have to realize that MS is seriously propping up the Lumia line to help get their OS to a market relevant point. There's no way Nokia can realistically subsidize the 920 or the 820 phones like we're seeing. Microsoft is eating a large chunk of that expense hoping for long term payoffs. If Nokia dropped MS and went to Android nobody would cover the tab which means they'd be selling their phones at the same price points as the GSIII or the Note II.

Not only would they be competing on Samsung's turf, they'd be doing it without the benefit of better pricing. Talk about a lose lose scenario for them.

The only real question is can WP gain any footholds? In the 4 months (give or take) since release the answer has been no. But long term... maybe. It's well regarded by most reviews so it's a matter of waiting to see if that can turn into sales.

I should point out that I have had all 3 flavors of mobile OS (2 iphones, an Android tablet and 2 Windows phones) and I swear by WP8. Android was nice but I just like Windows Phone 8 better. That said, it's a matter of personal preference.

What I don't get though is how WP8 can have such a nice workable interface and Windows 8 is such a steaming pile. Half the stuff that makes WP8 they simply left out of Windows 8.

Maybe Nokia should abandon their tragedy, er . . . um, I meant strategy of making Windows 8 phones instead of Android? It's not like the market share data wouldn't support such a change in strategy.

The problem is that Nokia and MS are attached at the hip based on business deals made over the last 3 years or so. That said, a viable option would be to make handsets for BOTH OSs. Similar to HTC. But it all comes down to the agreements made with MS.

I remember reading at the time that HTC's decision to support both OSs was not well received by Google. Suddenly thereafter, HTC kind of fell off the Android map, and has been struggling ever since to stay relevant - and by relevant, I mean they're struggling to stay just behind the pack - in the Android/Red Queen style rat race.

I'm not saying it's a bad idea, because I think diversification of their product line is a great idea (although I *love* my 920 and WP8)...but I'm not convinced Android is the best option. If they decided to offer a vanilla version of Android, that might work and offer them a unique value prop in a market overwhelmed with fragmentation. But I believe it would violate their agreement(s) with Microsoft.

On the other side though, it's clear Google has made a concerted push to kill WP8 before it has a chance to grow and mature (their hostile actions around Google Maps is a prime example). I have a feeling Google would actually bend over backward to accommodate Nokia, though, for that very reason. Yet I still don't like it. The market needs more differentiation, and people like me who loathe Android need an option outside of the iPhone.

That "toy OS" has, in three months, already provided me with more software updates than I received in over two years on my Android devices. It has 100% less carrier preloaded apps taking up space and eating my data connection trying to update themselves. It has the full Microsoft Office suite and more productivity tools than I can shake a fragmented and skinned Android phone at. And it combines great performance with rugged durability and a great battery.

Nokia pooled their resources with Blackberry!? I seriously wonder, do online bloggers and writers even fact-check what they write anymore?

Here's what I linked. Here is the source. BlackBerry & Nokia teamed up and made a lot of problems for each of them go away by settling all of their patent differences and licensing problems.

To be fair to OP, a patent (cross) license agreement is not pooling of resources. In that case Apple, MS, Nokia, Samsung all pool their resources. I believe even Google and Apple pool their resources after the Kodak deal. So we live in one big pool. Cross licensing is just buying legal peace.

That "toy OS" has, in three months, already provided me with more software updates than I received in over two years on my Android devices. It has 100% less carrier preloaded apps taking up space and eating my data connection trying to update themselves. It has the full Microsoft Office suite and more productivity tools than I can shake a fragmented and skinned Android phone at. And it combines great performance with rugged durability and a great battery.

For me that "toy OS" has also been rock solid stable and hasn't once made me stop and wonder "WTF is this thing doing now"

Putting the conspiracy hat on, I wonder if Nokia will now see an uptick in 3rd world sales as a result of bulk purchases by the Bill and Melinda Gates Foundation?

They are providing vaccines, not smartphones.

Although my comment was an attempt at levity, I was not being entirely sarcastic, as the Bill and Melinda Gates Foundation website lists multiple initiatives that have strong technology ties including:

1) Financial Services for the Poor where they mention programs like "Making Money Mobile" by utilizing mobile phones to store money for those without access to banks. The citation below is from the Gates website (linked):

Citation from the "Strategy Overview" document (linked below) from the Gates website:

Quote:

Our grantmaking priorities are:

• Knowledge exchange: finding new ways to share information and knowledge that help small farmers improve their farming techniques through information and communications technology, such as mobile phones.

The Gates Foundation website is pretty interesting and is worth a quick read for those interested in utilization of mobile technology in developing nations.

That "toy OS" has, in three months, already provided me with more software updates than I received in over two years on my Android devices. It has 100% less carrier preloaded apps taking up space and eating my data connection trying to update themselves. It has the full Microsoft Office suite and more productivity tools than I can shake a fragmented and skinned Android phone at. And it combines great performance with rugged durability and a great battery.

For me that "toy OS" has also been rock solid stable and hasn't once made me stop and wonder "WTF is this thing doing now"

Also, it's provided me with a phone that just works really damn well.

Well said. It was great leaving behind the horror time I spent with a Samsung Captivate. Back then, I wanted to back up my phone, so went to the Kies software. "Oh sorry", says Samsung, "but you need a Galaxy II or III to use that. Your options are nonexistent so you can f*** off and enjoy wondering what the hell your phone is doing." I, uh, just wanted to sync my phone. The internet was so helpful, though: "root it!" people said! Who cares that voids your warranty, you'll have updated software coded by folks you don't know who could have easily hidden in trap doors and their own security vulnerabilities.

My WP8 phone is stable, snappy, and fun to use. It's intuitive. And it doesn't make me want to break it in half (again) like other, lesser phones. And even if I wanted to, there's no way I could snap in half a Lumia 920.

Hopefully nokia has realized that the market is now customer driven. Instead of working things they think are the best, if they pay attention to what the consumers want, they still have a hope of bouncing back. They had a great opportunity to be pioneers with touchscreen phones. Instead they let apple steal it right from under their feet by saying that the consumers are not ready?!!! Seeing the Lumia line, things are getting better. But, if you want to be the top, you cannot be snail-slow with releases and you have to make the consumers believe their investment for a handset worth a diamond is actually going to last a while.

I think it's great that Nokia is making high-quality and fashionable entry-level smartphones. But when are we going to start seeing them *in the USA* on carriers like Virgin Mobile, Boost Mobile, US Cellular, etc?

Except for Samsung, none of the Android vendors make any profits. Why should Nokia switch to Android?

That's of course a big exception. Note that Samsung was the #2 handset manufacturer; it didn't exactly appear out of nowhere.

Like Nokia, Samsung had a large engineering team; a broad portfolio of related investments, capabilities and IP; oversaw a capable production process and had superb distribution around the world (Nokia's US presence being the obvious exception). I believe that all these resources, plus an aggressive business model of reaching for #1, came together more-or-less as Samsung simply planned.

None of the competing visions for different OSs or little fiefdoms that reputedly hobbled Nokia in its ability to respond to Apple's smartphone coup. There's irony, in that AFAICT, Nokia was by far the best “smartphone” in 2006 and 2007, but that was so far short of good enough that nobody went gaga over them; the profitable part of the business kept chugging along while the high-end products failed to respond to the existential threat from the keyboardless tap-n-zoom paradigm.

When Elop came on the scene, the factionalism must have been terrible. Even a year ago, the PureView 808 was released as the tail end of the Symbian lineup, putting an incredibly capable camera onto a dead-end platform instead of creating an “Enthusiast” line of WP devices.

Could Elop have united people under the banner waved by his biggest competitor? Probably not. But note that the telling above is all about ability to run a company with a strongly shared objective, not Android vs WP8. While WP was a disastrously immature product when Nokia adopted it (and Android was rather mature), the big fault seems to have been how Nokia failed to pull together as a team — exactly how “shoulda done Android” views would further fragment the company unity.

Maybe Nokia should abandon their tragedy, er . . . um, I meant strategy of making Windows 8 phones instead of Android? It's not like the market share data wouldn't support such a change in strategy.

Except for Samsung, none of the Android vendors make any profits. Why should Nokia switch to Android?

Because their hardware is better quality and their name was/is better.. If they built a 920 with minimally "skinned" (say just put on exclusive Nokia Apps and a custom, removable, launcher) Android and top end internals I don't see why anyone would buy/recommend an S3 over it (outside of removable battery).. same with an android 820 vs the S3 mini.. They could even offer a smaller 920 to fill the high end spec, but iPhone sized android market..

Anyway, this seemed inevitable.. wasn't this what got them to the top? covering all price points with solidly built phones..

It won't budge Apple (they don't care; they can sell two-gen-old iPhones and manage quite well) and Android already is making inroads in this space. This will, however, put the fear of God in the Artist Formerly Known as RIM.

BlackBerry really needs a low-end version of the Z10 and Q10, perhaps will a little less flash (8GB, like the base Nexus 4) because they owe their developing-market success to the Curve, and there's no BB10 Curve-equivalent.

...and the emerging markets are going to make or break Nokia and BlackBerry because they've pretty much already lost the first world outside of some strategic pockets.

I think it's great that Nokia is making high-quality and fashionable entry-level smartphones. But when are we going to start seeing them *in the USA* on carriers like Virgin Mobile, Boost Mobile, US Cellular, etc?

I must agree here, I have Sprint, and while they are getting some WP8 phones soon, they currently offer exactly ONE Windows phone, and it's not WP8 (and it's $549.00!!!). They currently don't offer any of the Lumia lines, and in fact, don't appear to offer -any- Nokia phones at all.

I would very much like to get one, but it's a classic case of knowing what I want, having money to spend, and they simply won't take my money because they don't offer the type of phone I really want to get. I wouldn't mind getting the new HTC, but it's YAAP (Yet Another Android Phone).

It might wind up coming down to just taking my business elsewhere, and I've been with Sprint for a very long time.

I've got the Arrive (also called the 7 Pro) with US Cellular. Stay away. It's heavy, its single-core processor is very slow (the experience is lag-free thanks to WP7, but apps load slowly), and camera and screen quality are miserable. I'm due for an upgrade in a month...and US Cellular currently has no WP8 phones. I may end up going Galaxy S3, though I'd much rather have a midrange Nokia.

I'm really annoyed I didn't wait after first surveying the market in Canada and deciding to go with Android thanks to mostly terrible WP8 options (all 3 year contracts, except the 8S that lacks usable storage, only available on a handful of carriers), the Lumia 620 is hitting at $250 outright and is made just right, decent enough hardware (I wish they went with 1GB RAM, but beggars and choosers and all that), MicroSD slot to back up the lack of storage and basically meets all my needs.

Ah well, maybe I can find a family member to push this Razr off onto and pick this up instead

One of the problems with Nokia, is that they arent just delivering enough smartphones. If you see the amount of units made and sold, its still less than 10 Million, how in the world are they thinking they can regain marketshare if they dont sell any phones?

Here in my country, its imposible to see nokia phones, everyone has samsungs (gosh, even the homeless have S3!!!, no lie!), and its not that they dont make it to the retail shops, its just that the carriers bring just overpriced old phones ( Movistar trying to sell Lumia 800 for 450 dollars). just no.

Im a hardcore Nokia fan, but if they dont deliver something that provides a badass smartphone -like the N95 in its time- then im just going to stick with my N9 (best phone ever) untill it dies or go to a Sony Xperia Z.

btw, i find the lumia 620 apealing, enough power at the right price point, but is hopless to wait for it in LATAM.

Nokia pooled their resources with Blackberry!? I seriously wonder, do online bloggers and writers even fact-check what they write anymore?

Here's what I linked. Here is the source. BlackBerry & Nokia teamed up and made a lot of problems for each of them go away by settling all of their patent differences and licensing problems.

Sorry, but that's still not quite right. Since 2009, RiM has been unlawfully using some of Nokia's WLAN patents (Nokia holds many of them, like for 4g/LTE, flexible touchscreens, wireless charging, etc.). Therefore, RiM agreed to pay Nokia $56m to settle the dispute. That's hardly "pooling resources"

It won't budge Apple (they don't care; they can sell two-gen-old iPhones and manage quite well) and Android already is making inroads in this space. This will, however, put the fear of God in the Artist Formerly Known as RIM.

BlackBerry really needs a low-end version of the Z10 and Q10, perhaps will a little less flash (8GB, like the base Nexus 4) because they owe their developing-market success to the Curve, and there's no BB10 Curve-equivalent.

...and the emerging markets are going to make or break Nokia and BlackBerry because they've pretty much already lost the first world outside of some strategic pockets.

These "emerging markets" have grabbed us firmly by the ghoulies - they produce most things we buy and use today. Looking at the population of India, China, Indonesia and South America, Europe and the U.S. matter much less.

Lee Hutchinson / Lee is the Senior Reviews Editor at Ars and is responsible for the product news and reviews section. He also knows stuff about enterprise storage, security, and manned space flight. Lee is based in Houston, TX.